This Document Contains Chapters 19 to 21 Chapter 19 Labor and Employment Discrimination Law CASES IN THIS CHAPTER Kochi Hoso (Broadcasting Co.) Equal Employment Opportunity Commission v. Arabian American Oil Co. Reyes-Gaona v. North Carolina Growers Ass’n, Inc. Mahoney v. RFE/RL, Inc. European Commission Proceedings against Czech Republic . . . . Aldo Malgorzata Jany & Others v. Staatssecretaris van Justitie Hill and Stapleton v. Revenue Commissioners . . . Sumitomo Electric Industries, Ltd. Kiobel v. Royal Dutch Petroleum Co. TEACHING SUMMARY Employers setting up shop in foreign countries may be surprised to find a number of very different employment and discharge laws with which they must comply. Particularly in Western Europe, U.S. businesses will find laws requiring management to consult with labor consuls on many decisions, to provide enhanced information to such consuls, and even to accept a degree of consul input. Additionally, many countries have laws restricting the number of hours that may be worked in a week and the number of weekends worked in a month, anti-discrimination and civil union provisions (thus requiring benefits for life partners), and various leave and remuneration statutes. In a few instances, such as with requirements regarding disclosure to employees of plant closings and the Family and Medical Leave Act, U.S. law has been amended to add foreign aspects. Instructors or students may also wish to review the Supplemental Information on FCN Treaties, as these may alter a foreign employer’s obligations under domestic employment law. CASES AND QUESTIONS Kochi Hoso (Broadcasting Co.) 1. If a firm were establishing an office in Japan, how would it determine the “socially accepted” view on the discharge of employees for tardiness? Would it look to the relevant statutes? Answer: Such a firm would be wish to conduct its own research on accepted practices relating to tardiness within its industry rather than relying entirely on applicable statutory law. 2. Traditionally, Japanese work for an employer their entire careers. How does that influence the “socially accepted” view reflected in this opinion? Is employment law affected by social norms in the United States? Answer: Discharge from employment may be viewed as a far more serious matter in Japan than in the United States given the social norm of lifetime employment with one company. By contrast, in the United States, the presumptive rule is all employees are “employees at will,” and thus may be discharged at any time, for any reason, provided that reason is not illegal. There is also no federal statute and virtually no state statutes limiting discharge to “cause” or requiring employers to state the reason for discharge. 3. In a country that views employment as strictly a contractual relationship, how would this case have come out? Answer: The discharge would be upheld as the contract failed to recognize excuses for tardiness. Equal Employment Opportunity Commission v. Arabian American Oil Co. 1. Is the presumption that a federal law will or will not have extraterritorial application, if not otherwise stated? Answer: Laws will not have extraterritorial application unless they explicitly state to the contrary. 2. What type of a legal analysis did the court apply, literal construction or contextual construction? Answer: A literal approach, looking at the words in the statute and giving them their ordinary effect. 3. In light of immediate, subsequent action by Congress, did it appear that the statute had accurately reflected (and the court had iterated) Congress’s intent? Answer: No. Soon after the decision, Congress amended Title VII to explicitly state that it applied to firms operating outside of the U.S., but under the control of a U.S. entity. Reyes-Gaona v. North Carolina Growers Ass’n, Inc. 1. Why did the EEOC file a complaint against NCGA for a position Reyes-Gaona was applying for in Mexico? Answer: The EEOC argued the ADEA applied because Reyes-Gaona was applying for an employment position within the United States, even though the application and decision-making mechanism was in Mexico. 2. Could American firms avoid the ADEA by conducting the hiring process in Mexico? Answer: Not after the ADEA Amendments of 1984 that expanded coverage to U.S. employees employed by U.S. companies in foreign states. 3. What was the court’s reasoning to deny the EEOC complaint? How did the legal presumptions factor into its decision? Answer: The court held that the 1984 Amendments to ADEA, which were being relied upon by the EEOC, did not apply to Reyes-Gaona. “The simple submission of a resume abroad does not confer the right to file an ADEA action. Such a broad reading of the Act could have staggering consequences for American companies.” The court followed the U.S. Supreme Court’s instruction to lower courts to take seriously the presumption against extraterritoriality of U.S. laws. Moreover, contrary to more activist jurisdictions, the 4th Circuit declined to go beyond the statute, beyond a clear unambiguous statement from Congress. Mahoney v. RFE/RL, Inc. 1. Does the court’s decision mean that any collective bargaining agreement falls within the “foreign laws” exception? What if refusal to recognize CBA had been acceptable under German law? Answer: No. The court noted that this was not merely a collective bargaining agreement under contract law, but that refusal to recognize the CBA “would have violated the German laws standing behind such contracts as well as decisions of the Munich Labor Court.” Such a situation would never exist in the U.S., as the Supremacy Clause would require CBAs to comply with state and federal law. The result obviously changes if the refusal to recognize was acceptable under German law. 2. Recalling the Denty court’s comments about attempts to avoid the ADEA, why could it not be said that RFE/RL agreed to the CBA provision in order to circumvent the ADEA? When was the CBA entered into? Answer: Mandatory retirement provisions are common in Germany, and this particular agreement pre-dated the extra-territorial application of the ADEA. 3. What does this decision reflect about courts’ tendencies when faced with a potential conflict of laws? Answer: This case demonstrates deference to national laws at the site of employment rather than granting U.S. employment law unfettered extraterritorial application. European Commission Proceedings against Czech Republic . . . 1. The Czech Republic is about 95 percent ethnic Czech. Knowing this, do you think that there was much racial or ethnic discrimination? Do you think that might have been why no written laws forbade it? What was accomplished by having such laws passed in accordance with the Directive? Answer: This question calls for student opinion. However, students may be directed to readings and research regarding the difficulty of integrating ethnic groups into the EU and resultant tensions. Examples include legislation directed at Muslims and Roma populations in France and tensions in the United Kingdom regarding Pakistani immigration and Germany regarding Turkish immigration. 2. What does this case reflect about EU recognition of gay and lesbian rights? Answer: There are strong protections in place regarding gay and lesbian rights in the EU. However, attitudes across the EU remain deeply divided and legal protections and their enforcement often reflect such different attitudes. 3. Do you think that official government offices to promote discrimination are helpful? In what way? Answer: This question calls for an opinion from students. Aldo Malgorzata Jany & Others v. Staatssecretaris van Justitie 1. What would have been the result of the case if prostitution in the Netherlands was illegal for Dutch women? Is this a case about privacy rights or ethnic discrimination? Answer: Yes. This case does not permit measures that have a disparate impact against the nationals of other member states. However, if the activity were also illegal for nationals, then there would be no disparate impact. 2. What would have been the result of the case if the plaintiffs had been Russian nationals rather than nationals of Poland and the Czech Republic? Answer: The Netherlands would most likely have prevailed as the prohibition upon disparate impact only applies to nationals of other EU member states. 3. Would Czech and Polish nationals be equally free to practice other professions, such as law? What legitimate barriers might there be to entry into those professions? Answer: Not necessarily. Educational, licensing and linguistic barriers may serve to prohibit free practice of such professions across national boundaries. Hill and Stapleton v. Revenue Commissioners . . . 1. What would have been the result in this case if more men had availed themselves of the job-sharing option? Answer: Possibly. The result may have been different if there was a significant number of male job-sharers who suffered the same disadvantages as their female counterparts. 2. If in the future more men take care of the children and the percentage of women job-sharers drops, could the employer change its rules back to what they were before this case in order to reduce expenses? Answer: Possibly although unlikely. Once again, significant portions of men would have to avail themselves of the job-sharing arrangement and be treated in the same manner as their female counterparts. 3. What effect will this ruling have on Irish taxpayers? Would this decision prevent the government agencies from eliminating the job-sharing program to save expenses? Answer: The cost of the job-sharing arrangement has certainly increased. However, government agencies could eliminate the program to save costs. The only requirement is equal treatment if they are going to utilize the program. There is no mandate that it be maintained. Sumitomo Electric Industries, Ltd 1. How is this employment law determination similar to that in the Kochi Hoso case earlier in this chapter? Was the judge overruling written law with his view of a “socially accepted” view? Answer: The decisions are similar to the extent there is considerable reliance upon “socially accepted” views. However, the judge in this case seems to go much further interpreting written law in the context of “socially accepted” views. One may reach the conclusion that the court has in fact disregarded the written law in this case. 2. Do “socially accepted” views change over time? What would you expect the result to have been next time a similar suit was brought in this court? Answer: The question calls for student opinion. Students may wish to review the history of attitudes on racial discrimination in the United States in formulating their answers. 3. Is it appropriate for different cultures to have different laws relating to gender employment regulation? Answer: This question calls for student opinion. Kiobel v. Royal Dutch Petroleum Co. 1. Kiobel limits the availability of ATS claims premised on overseas conduct, but the decision “leaves for another day the determination of just when the presumption against extraterritoriality might be ‘overcome.’” Should multinational companies expect plaintiffs to continue asserting ATS claims premised on at least some U.S.-based conduct in connection with the underlying tort? Answer: Kiobel will present a significant hurdle to lawsuits against U.S. companies based on actions abroad. But if the plaintiff can find a U.S. nexus for the labor practice, this is a hurdle that may be cleared. 2. Do you think plaintiffs will try their chances with ATS claims against corporate defendants that have a more substantial connection to the United States than “mere presence” through an investment office, securities exchange listing, or the like? Answer: In this case, the court notes mere corporate presence in the U.S. is not enough to allow ATS claims, but plaintiffs who can find a greater presence by a defendant no doubt will bring claims. The case suggests the presence perhaps needs to be substantial or significant. 3. Kiobel did not rule on the availability of aiding and abetting liability under the ATS. Do you think that ATS claims premised on indirect acts of “help[ing] others” to commit human rights abuses are likely to be recognized? Answer: This answer calls for student opinion. ANSWERS TO CASE PROBLEMS 1. Answer: A U.S. court seeking to apply a federal law or constitutional protection would not do so, but there are a growing number of states that limit (by statute) the power of an employer to discharge its employees. Many of these limitations are bounded by views of “social justice” and require cause for discharge. The so-called contract between a drug dealer and money man (or trigger man), however, suffers from a basic, contractual flaw: it presumably is for an illegal purpose, thus it is not legally enforceable. 2. Answer: Since her business will be physically present and operating in Germany, Currie will have to comply with German labor and environmental laws. German labor law includes provisions regarding the establishment of works councils, employee consultation and representation, and reductions in force. German workers, as members of the EU, are also entitled to 14 weeks of maternity leave with 75-80% pay. It is possible that Germany and the U.S. have a FCN Treaty, which will give Currie some flexibility regarding the employment of key personnel, i.e., permitting some preferences favoring Americans. If she employs U.S. nationals in her German plant, she will also have to comply with the anti-discrimination provisions of Title VII of the U.S. Civil Rights Act, the ADEA, and any other federal laws that explicitly contemplate extraterritorial application. These laws will not apply to German workers. MANAGERIAL IMPLICATIONS Students should distinguish the legal issues pertaining to discrimination, i.e., those governed by Title VII (gender, race, ethnicity, religion, national origin) from the ethical issues. Additionally, students should note that a company can raise the defense of BFOQ (bona fide occupational qualification) exception to the non-discrimination command of Title VII, and would probably win. Further, the Supreme Court will not interpret Title VII to require the company to break the law of the host country. With regard to the Catholic employee, however, the legal question is somewhat different. There would be no discrimination in failing to make the foreign assignment if a Christian accepted the job in South Moravia. If the Catholic employee were put in a South Moravian jail for worshipping on Sunday in pubic, a cause of action for the company’s discriminatory behavior would not arise. But the alleged discrimination might be the employer’s failure to allow Christian employees an opportunity to worship at the place of employment. ETHICAL CONSIDERATIONS This consideration calls for student opinion. Students may be questioned whether any of the results of the Global Gender Gap are surprising to them, especially with respect to the ranking of the United States. In conducting an ethical analysis of the results, students may utilize teleological frameworks from which they may conclude that, while perhaps understandable from a moral relativist or cultural relativist point of view, continued distinctions on the basis of gender do not serve the greatest good for the greatest number in a manner consistent with utilitarianism. Furthermore, such continued discrimination is contrary to the fundamental rights upon which the natural law school is based, is an undesirable universal rule pursuant to the categorical imperative and is inequitable in a manner in violation of the principles of contractarianism. Chapter 20 Environmental Law CASES IN THIS CHAPTER Pulp Mills on the River Uruguay (Argentina v. Uruguay) European Communities—Measures Affecting Asbestos & Asbestos-Containing Products United States—Import Prohibition of Certain Shrimp and Shrimp Products Judgment of February 23, 1988 Skeena River Fishery: Canada TEACHING SUMMARY In most areas of regulation, the United States first enacted national legislation and later considered the global ramifications. In the area of the environment, however, international concerns preceded domestic concerns. Indeed, the environment is one issue that knows no national boundaries. Individual countries can enact environmental standards within their boundaries, but air, waters, flora, and fauna all move from country to country, ocean to ocean with regard to such political subdivisions and laws. For example, the U.S. and China have a majority of their land masses in the same latitudes. As a result, air pollution in the U.S. may be carried into China. Similarly, polluted air from other lands may find its way into the U.S., notwithstanding our domestic laws ensuring air quality or pollution control. Consequently, the environment is an issue properly requiring global cooperation, and a number of international treaties and standards regarding the environment have developed. These include the ISO standards and those of the European Community. In other instances, existing understandings under WTO and GATT have been applied to environmental issues. Furthermore, strict environmental legislation can lead to a competitive disadvantage for countries, as compliance with domestic regulations will often make its products more expensive. Indeed, recognizing the symbiotic relationship between environmental regulations and competition, some countries use environmental laws not so much as a mechanism to protect the environment than as a mechanism to limit foreign competition (making them environmentally disguised trade barriers). CASE QUESTIONS AND ANSWERS Pulp Mills on the River Uruguay (Argentina v. Uruguay 1. The court found that Uruguay violated its procedural duties to provide notice and seek agreement with Argentina before launching on the project, and then it argued that it was disproportionate to dismantle the pulp mills as a remedy for its violation. Did Uruguay then benefit from proceeding with construction without seeking consent? How might Argentina have prevented this from happening? Answer: Yes. The ICJ’s holding placed Argentina in a difficult position. Perhaps a request for consultation prior to the actual construction of the mills would have been in order or independent environmental impact assessments as produced by Uruguay would have been of assistance. 2. Was Argentina able to show that Uruguay’s new mills were polluting in violation of the treaty? What would have happened if Argentina had been able to prove that? Answer: No. If it had been able to prove such environmental damage, it may have been entitled to reparations but most likely not to an order shutting down the mills. 3. The court imposed a duty to cooperate in monitoring ongoing pollution. Did such a duty not already exist? What do you think will happen as a result of this future monitoring? Answer: Yes. States already have a general obligation to cooperate with one another on transnational environmental issues. The likely outcome in this case is continued controversy regarding the operation of the mills as Argentina claims that the mills continue to harm the River Uruguay while Uruguay claims that the risk to the environment is overstated. European Communities—Measures Affecting Asbestos & Asbestos-Containing Products 1. Was there any question that France’s ban would have a discriminatory impact on Canadian asbestos products? Answer: No. 2. If France’s ban had been based on grounds other than protecting the health of French residents, would it have been upheld? Do nations have greater discretion to discriminate against foreign products if they base the discrimination on health concerns? Answer: Probably not as the basis of the opinion was that there was no reasonably available alternative to the prevention of asbestos-related harm. Nations may have more discretion in areas of public safety as long as their measures are scientifically based, do not act as an arbitrary and capricious discrimination against imports and are as least restrictive of free trade as possible. 3. How would the Appellate Body have been perceived if it compelled France to accept products that its democratically elected government deemed unhealthy? Do you think this judicial rule might be partially based on the tribunal’s desire to preserve its legitimacy? Answer: This question calls for student opinion. United States—Import Prohibition of Certain Shrimp and Shrimp Products 1. The United States had to change its original regulation regarding the preservation of turtles. How does this compare to the treatment given to France’s law on asbestos? Do nations have more discretion in discriminating to protect human health within their borders than animal species around the world? Answer: This certainly seems to be the case although students may have differing opinions in this regard. 2. What changes to the rules made them acceptable “discrimination”? Answer: The State Department revised the 609 guidelines to bring it into compliance with GATT. This included certification at the request of foreign governments that their commercial shrimp trawlers were using TEDs comparable in effectiveness to those used in the United States. Malaysia was not certified by the State Department, however, and challenged the procedure. The WTO panel analyzed the flexibility of the revised 609 guidelines, which included accommodation of Malaysian shrimp production and the turtle conservation program. Malaysia appealed the WTO panel’s adverse ruling that the new guidelines no longer constituted an “unjustifiable discrimination.” The WTO Appellate Body affirmed the panel’s decision. 3. Can a large market such as the United States change environmental policy throughout the world using measures like this? Why? Is it antidemocratic to have the United States impose its policies on other nations through its bargaining power? Answer: In a manner similar to many commercially powerful nations, the United States can change environmental policy through measures such as these. Other examples include dolphin-friendly tuna, trade in endangered species and anti-whaling efforts. The remainder of the question calls for student opinion.. Judgment of February 23, 1988 1. What is the major difference between this case and the Pulp Mills on the River Uruguay case? Answer: The Austrian court not only accepted jurisdiction but remanded the case to the lower court for a determination as to whether an order enjoining the construction of the plant should occur in the first place. 2. How did the Austrian court justify getting jurisdiction over a matter over 100 kilometers in the territory of another country? Answer: The Oberste Gerichtshof treated the pollution like just another instance of state-directed commercial activity. It found that if Austrians could not get adequate relief for their grievances in Czechoslovakia, they could sue its government in Austria. 3. If an Austrian court issues a judgment and the Czech party refuses to comply, how do you think that the plaintiff will seek to enforce the judgment? Answer: Recognition of the Austrian judgment may be sought in Czech courts. Alternatively, this may be a matter to be resolved by the ICJ or through negotiations between the countries. However, the Austrian court judgment may ultimately prove to be a wasted court exercise if there is no available method by which to compel enforcement. Skeena River Fishery: Canada 1. How is this approach different from that taken by Austrian plaintiffs against Czechs in the Judgment case? Does the international treaty make transnational environmental protection easier? Answer: Unlike the Judgment case, the complaint in this dispute was filed with a transnational body, the North American Commission on Environmental Cooperation created pursuant to the North American Free Trade Agreement. The NAAEC Agreement permits the Secretariat to consider submissions from any NGO or person who asserts that a party to the NAAEC is not enforcing its environmental law. (This is found in Article 14.) Here, the North Coast Steelhead Alliance claimed that it was such an NGO, and the decisionmaker agreed. NAFTA’s existence and the resultant NAAEC Agreement made the pursuit of this dispute easier for the plaintiff. 2. Do the complainants in Skeena River Fishery have to prove financial damage as a result of Canada’s alleged non-enforcement? Do the plaintiffs in the Austrian Judgment case have to prove such damages? What was the basis for the determination that the NCSA stated an actionable claim? Answer: The complainants in the Skeena River Fishery are required, under Article 14(1) of the NAAEC Agreement, to demonstrate harm to the interests of the organization (the NCSA) and its members. By contrast, any harm suffered by the Austrian plaintiffs in the Judgment case was purely speculative at the time of the court’s opinion. 3. How will the Canadian government’s spending priorities factor into this decision? Should the Secretariat be able to order Canada to spend money on fisheries enforcement rather than unemployment insurance? Can the Secretariat do that? Answer: Certainly Canada’s spending priorities will factor into compliance with this decision as the Secretariat lacks the authority to order Canada to spend money implementing the decision. ANSWERS TO QUESTIONS AND CASE PROBLEMS 1. Answer: If a private cause of action had existed in Czechoslovakia, the court might have declined to hear the case on the grounds of forum non conveniens (assuming that there was an Austrian equivalent to the U.S. judicial doctrine). The existence of a private cause of action in Czechoslovakia makes it “reasonable” for the plaintiff to pursue legal proceedings in Czechoslovakia; this assumes that there is a private cause of action for governmental actions that are commercial. With respect to a claim based on the effects (in Austria) of Chernobyl’s radioactive fallout, the court would (to be consistent) take “jurisdiction ratione loci” in this case if there were no way that the U.S.S.R. would have considered Chernobyl to be jure gestionis. Surprisingly, however, the court considered a spate of lawsuits brought by Austrians against the Soviet Union as a result of the Chernobyl accident. Upon analysis in those cases, the Oberste Gerichtshof determined that under Soviet law, the wrongs were compensable, and declined to assume jurisdiction. 2. Answer: Neither money damage awards nor injunctive relief are likely to be enforced against Czechoslovakia. If the government of Czechoslovakia had assets in Austria that equaled the amount of monetary damages, the money damages award might be able to be enforced. (Or, the judgment could be enforced up to the amount of assets that existed in Austria.) Injunctive relief, however, can only be enforced within the territory of the forum country. Ultimately, if relations between neighboring countries are close enough, some settlement of cross-border pollution issues will come about, but (most likely) will address issues prospectively rather than grant retroactive damage payments. At best, general remedial efforts will be secured by treaty rather than relief for any particular plaintiff. 3. Answer: Both economic and political considerations are important. If the officer's political views or notions of social responsibility tend to favor conservation of the environment, she may be disinclined to make the investment on those grounds alone. To refuse to make an investment in furtherance of one's own political views rather than because of the interests of the corporation, however, is fraught with danger. The officer has a fiduciary obligation to the company's shareholders--many of whom will disagree with her political views--to maximize the corporation's profits. It may be difficult to explain a business decision on a political basis to shareholders who do not share the officer's political views. Nonetheless, her decision to invest may also be influenced by the changing political environment of the former Soviet block. Eastern European countries are seeking admission into the European Community, and that requires those countries to conform their law to Community directives. These include laws on environmental issues. Thus, if the company went forward to take advantage of the more liberal environmental standards, it would soon have to modify the plant with expensive environmental adjustments at great capital expense. Thus, it would be more economical to build a plant that incorporates such future adjustments. Further, pollution in the cheek by jowl environment of Europe can lead, as in the Austrian February 23 judgment example, to liability in a neighboring European country. Thus, as a pure economic matter, a decision not to build a dirty plant seems best calculated to maximize the corporation's long-term profitability. 4. Answer: This question explores the conflicting legal and political positions in this area. On the one hand, a sovereign nation has a right to democratically determine how to use the resources within its territory so as to improve the standard of living of its people. On the other, sometimes such nations use the resources within their boundaries in a way that adversely affects people outside of their boundaries. In this case, it seems quite doubtful that the adverse impact on others -- a very minimally reduced source of oxygen -- would be found to be of “serious consequence” under the Trail Smelter rationale. Also, there is the “someone else will bid on it anyway” rationale versus the possible adverse publicity to the company illustrated in the Nestle infant formula cases discussed in the text. 5. Answer: Assume that Livy, a GATT member, is not also a signatory to the Montreal Protocol, or has renounced its intent to abide by those treaty provisions. Article III would only prohibit the U.S. from discrimination based on the production or processing method, or from discrimination where the product is - as presented on import - the same as domestic products. A CFC-emitting refrigerator, however, is different from a non-CFC emitting refrigerator. Therefore, since Livy’s refrigerators are not “like” products of the U.S. (or any other GATT member nation), then the member state may discriminate, or treat them differently. The tunas in the U.S.-Mexico case were “like products,” thus discrimination was forbidden. Suppose, however, that Livy has a strong silicon-chip operation, which uses CFCs as a solvent, and the U.S. disallowed transport within the U.S. of silicon chips that have been washed in CFCs, but allowed transport of silicon chips that are ozone friendly. Under the Tuna decision, this treatment would be improper. The production or processing method cannot be the basis for distinguishing otherwise “like” products. The proper remedy (according to the Tuna panel) would be for the U.S. or any other state observing the Montreal Protocol to persuade Livy to join the Protocol. (GATT does allow separate treaty obligations to be enforced against member states; if there is a trade restriction, it would be one voluntarily agreed to by Livy.) 6. Answer: Based on the GATT Tuna from Mexico decision, the Kingdom of Carolinium cannot attempt to save species outside its jurisdiction. Consequently, the measures taken in the HCHA violate Carolinium’s GATT obligations under Article XI, and cannot be justified as exceptions under Article XX. Indeed, these are analogous to those of the U.S. in the MMPA to protect dolphins outside the territorial jurisdiction of the United States. MANAGERIAL IMPLICATIONS Students may address this question in terms of legal liabilities and future ramifications. With regard to the former, legal liabilities, there are domestic and international concerns. In terms of domestic law, if the Bishopric of Saul has virtually no environmental laws, then there are no causes of action available under Saul’s law by which Ortiz-Hartman (OH) can be held liable. This could change if OH seeks membership in the WTO and subscribes to GATT principles: eventually, GATT may begin to re-think its view that lower environmental standards constitute a legitimate comparative advantage for global trade, or to rethink cases like the Mexican tuna/Pacific dolphin controversy and decide that some import distinctions based on production/processing methods may be justified. With regard to international law, students should recognize that Saul is violating the law of nations (Stockholm Declaration, Principle 21/Rio Declaration, Principle 2) by allowing those under its control to cause environmental harm beyond Saul’s borders. General tort principles of negligence, nuisance, or trespass might apply. Nevertheless, collecting damages for such acts may range from unlikely to impossible if OH does not have assets in those neighboring countries. In the long term, the prognosis is somewhat less favorable: students should acknowledge the influence of ISO standards as environmental management directives. These provide industry with benchmarks against which to measure environmental performance. Thus, if a company expects to export to the EU, it will likely find that they cannot do business in the EU unless it conforms to these standards. Students should also recognize that there is a tension between these standards and WTO and GATT principles. ETHICAL CONSIDERATIONS This consideration calls for student opinion. In reaching their conclusions, students may be asked whether Chevron’s response to the litigation promoted its self-interest to the greatest degree possible as set forth in ethical egoism, whether Texaco’s conduct in Ecuador was ethical based upon the time and place of its occurrence and whether Texaco’s conduct and Chevron’s litigation strategy produced the greatest overall good for affected persons as set forth in utilitarianism. From a deontological standpoint, it may be asked whether Chevron is setting an example by which other multinational corporations may conduct their operations in the developing world whether Texaco’s conduct treated Ecuadorians as means to the end of exploiting oil and gas resources and whether Chevron’s decision to vigorously defend the Ecuadorian litigation and resist settlement is the fairest and most equitable resolution as anticipated by contractarianism. Chapter 21 Regulating the competitive Environment CASES IN THIS CHAPTER Microsoft Corporation v. Commission of the European Communities Airtours v. Commission of the European Communities Schneider Elec. SA v. Commission of the European Communities Tetra Laval BV v. Commission of the European Communities United States v. Aluminum Co. of America Hartford Fire Insurance Co. v. California Animal Science Products, Inc. v. China Minmetals Corp., et al. A. Ahlstrom Osakeyhtio v. Commission of the European Communities INTRODUCTION Although the U.S. was among the first nations to implement controls over large business enterprises (in the form of the Sherman Anti-Trust Act) it is not the only country with such regulations. In some ways, anti-competition laws are similar nation to nation: most prohibit cartels (although often import and export cartels are exempted implicitly or by practice). Yet, in other ways, they vary considerably in the treatment of various business behaviors. Moreover, even similar laws may receive dissimilar enforcement. Additionally, that anti-trust laws seek to promote free competition underscores their importance in international trade -- if private parties were permitted to interfere with free market forces and restrain cross-border trade (such as through price-fixing or market-sharing agreements), they could effectively replaced the government-imposed barriers that WTO/ GATT seek to limit. CASE QUESTIONS AND ANSWERS Microsoft Corporation v. Commission of the European Communities 1. Would Microsoft have been ordered to provide the interconnection instructions if it had only a 40 percent market share in operating systems? Answer: Possibly not. The Commission concluded that Microsoft had a dominant position in client PC operating systems since 1996 given that its market share exceeded ninety percent, and there were significant barriers to entry that prevented potential competitors from effectively entering the marketplace. The Commission concluded Microsoft maintained a dominant position in the workgroup server operating system market as it maintained a sixty percent market share (no other competitor had more than a twenty-five percent market share), and there were close commercial and technological links between the PC and workgroup markets. These dominant positions were coupled with Microsoft’s refusal to disclose information to its competitors relating to interoperability in the software industry (a particularly important topic in the EU) and the use of Microsoft’s power in the client PC operating systems market to eliminate competition in the related work group server operating systems market. 2. If Apple were to obtain a larger market share in the future, would there be a basis for relieving Microsoft of this judgment? Answer: Possibly. However, this would depend on the market structure at the time and the presence or absence of abuse of dominant market positions. 3. This order prohibits Microsoft from giving a program away when the computer is purchased. Why? Answer: The Court concluded that the Commission properly found that the Windows Media Player reached a large majority of client PC users and that the transmission of content and application compatible with a given media player was a significant competitive factor given its impact on the popularity of that media player. Microsoft’s Media Player enjoyed market dominance given its bundling with the Windows client PC operating system, a market in which Microsoft was abusing its dominant position. Airtours v. Commission of the European Communities 1. Does the order prevent Airtours from entering into mergers in the future with companies that have a smaller share of the U.K. market? Answer: No. 2. If Airtours proposed a merger with another firm with a very large share of the German market but no share of the U.K. market, how would the merger be treated based on this opinion? Answer: Quite possibly different if the Merger Task Force was able to demonstrate that the merger would give rise to a collective dominant position in the German market as to significantly impede effective competition. 3. What “product” is Airtours selling? Would this decision prevent a merger with a party in the travel business that sold a “different” product? Answer: Airtours sells short haul travel vacations. Whether a merger with a travel company selling a different product would violate the merger guidelines depends on the breadth of the definition of the relevant market. Schneider Elec. SA v. Commission 1. Schneider and Legrand did not sell the same product. Why was their combination a threat to competition? Answer: The MTF determined that the merger would create the risk of anticompetitive dominant positions in a number of markets including low-voltage electrical equipment and switchboard and panel-board components. 2. Why would a combination of parties with “complementary” products create a threat to competition? How would this disadvantage competitors with only one of the complementary products? Answer: A firm in such a circumstance could engage in anti-competitive practices given its enhanced ability to leverage the market based upon its dominant position across different product lines. 3. What implications does this have for a maker of a personal computer operating system acquiring a company that sells software applications? Answer: Such a merger could draw the attention of the MTF to the extent that it creates the risk of anticompetitive dominant positions in these markets. Tetra Laval BV v. Commission 1. What evidence would have supported the Merger Task Force’s decision and led to a different result? Answer: There was insufficient evidence that the merger would have resulted in a significant vertical effect on the PET market. The result may have been different had Tetra and Sidel been proven to have stronger positions in the relevant markets. 2. Is “leveraging” now wrong in the absence of anticompetitive effect in the EU? How could the vertical restrictions have posed more of a competitive threat? Answer: No. In short, the MTF’s decision was lacking evidence. Tetra Laval, the world’s largest supplier of carton packaging, acquired a French company, Sidel, which manufactured plastic bottle plugs (PET) without EC approval. The MFT prohibited the merger on the grounds that the merger would “leverage” Tetra’s dominance in the carton market to the plastic bottle plug market. However, there was no evidence that the merger would have resulted in a significant vertical effect on the PET market. The result may have been different had Tetra and Sidel been proven to have stronger positions in the relevant markets. 3. What effect does a reputation for being an overly aggressive regulator have on the regulator’s ability to defend its position when appealed? Are competition law cases decided on factors other than pure application of law to facts? Answer: This question calls for student opinion. However, it bears to note that the more aggressive the regulatory stance, more often the chance for rebuke from national courts and international tribunals. United States v. Aluminum Co. of America 1. What are some of the complications that occur when U.S. courts order a foreign manufacturer to pay billions in damages for an agreement that would be acceptable under that country’s competition laws? Answer: This question calls for student opinion and further research. However, it bears to note that complications may arise in foreign relations between the countries, and there will undoubtedly be enforcement of judgment issues. 2. Does Judge Hand see any limits placed by the U.S. Constitution on antitrust law? Answer: Very few. U.S. antitrust law could constitutionally reach activities occurring outside of the United States between non-U.S. entities that had or were intended to have a substantial impact on imports to the United States. 3. Judge Hand’s test requires that a “substantial” number of imports be affected by the anticompetitive conduct. To what measure was he referring by using that word? Would this be objectionable if only 1 percent of the U.S. market was affected? Answer: Judge Hand’s reference is cryptic. Is he referring to market share, number of units, weight, or value of imports? Any of these three measures could be used to calculate “substantiality.” On the other hand, it is unlikely that a 1 percent market share would meet even Judge Hand’s expansive view of U.S. competition law. Hartford Fire Insurance Co., Inc., v. California 1. Do you think Justice Scalia would have spoken out the same way if, like the majority, he had read English and U.S. law not to be in conflict? Answer: Perhaps not. In the majority opinion, Justice Souter stated that there is no “true” conflict between U.S. law and British law because the British company could, without violating British law, comply with both U.S. and British law. He, thus, concluded that there is no substantial reason to consider “comity” as a basis for declining to take jurisdiction in this case. 2. In determining whether the Sherman Act applies to a business outside of the United States, if Congress’ intent is not clear, to whom should courts give the benefit of the doubt? Answer: There is a presumption against extraterritoriality of U.S. law. Any ambiguities should be interpreted against the extension of U.S. law to overseas activities. 3. What would happen if a U.S. judge decided that English insurance law created an unlawful monopoly under U.S. law? Answer: The answer to this question is unclear. Would a U.S. court of appeals apply prescriptive comity and respect the legal system of another state despite the impact on the U.S. marketplace or would such court exercise jurisdiction based upon an expansive view of the application of U.S. competition law? The question is open to student discussion. Animal Science Products, Inc. v. China Minmetals Corp., et al. 1. Compare the application of the import trade or commerce exception in Carpet Group with the application in Animal Science. Why did it apply in Carpet Group? Why did it apply in Animal Science? Answer: The exception in the FTAIA means that the U.S. antitrust laws do apply extraterritorially. In the carpet case, the exception did apply because the defendants targeted parts of the U.S. import market so that some firms could import but retailers could not. The trial court here looked only at whether the defendant was an importer and thus used the wrong test so the case was sent back to that court. As the defendant’s actions were aimed at the U.S. import of Chinese magnesite, most likely the exception also will apply here. 2. Under the effects test as interpreted in Animal Science, could an effect be “reasonably foreseeable” even if the defendant does not foresee the effect? In a trial, how would you prove that an effect was “reasonably foreseeable”? Answer: What is foreseeable to the defendant is a using a subjective test of what that person forsees. “Reasonable foreseeable” looks at what a reasonable person foresees so the two can differ. The court suggests that what practical businesspersons would foresee would determine what is regarded here as “reasonably foreseeable”. A.Ahlstrom Osakeyhtio et al. v. Commission of the European Communities 1. If the exporters were outside of the United States and exporting products there, would a U.S. court have jurisdiction under the FTAIA? Answer: Possibly although the exercise of such jurisdiction would be limited to the U.S. purchases if the foreign purchases had an adverse foreign impact separate and apart from the impact in the United States. . 2. Is the holding in this case the same as or different from that of the majority in Hartford? Does it matter that the European Commission was declaring illegal activity of something that is legal from the U.S. perspective? Answer: The decision is different. The ECJ exercised jurisdiction over entities that had no presence in the EU other than through exportation to the EU through independent distributors. 3. What effect does this have on the Webb-Pomerene Act? Answer: It serves to subject members of export associations such as those authorized by the Act to be subject to penalties in the EU. ANSWERS TO QUESTIONS AND CASE PROBLEMS 1. Answer: Under both Judge Hand's test in Alcoa case and the standard in the Foreign Trade Antitrust Improvements Act, conduct that ties up 95% of a product and prevents entry by a potential competitor will have a reasonably foreseeable effect on United States commerce. It is an open question whether it is substantial, but that test is probably satisfied as well. There is also some question as to whether there was a specific intent to restrict imports into the United States as required by Judge Hand. The government's legalization of the cartel raises FSIA and Act of State issues. Because private persons could have entered into an agreement to restrict trade, it might be viewed as falling within the commercial activity exception to FSIA. On the other hand, the legislation might be viewed as tantamount to nationalization of the industry and therefore unassailable. Clearly, any court passing on the issues would have to address the validity of the legislation of a foreign government; a court may wish to avoid doing so on Act of State grounds. All in all, American antitrust law is unlikely to be applied. The case of goom is not that unlike the activities of the international oil cartel or of the South African diamond industry. A United States court could enjoin the foreign entities from selling goom in the United States and could award damages against the goom suppliers that could be executed on their assets situated in the United States. 2. Answer: In light of the significant impact of the “goom” business on the Slobovian standard of living, it certainly would have a substantial impact on its relations with the United States. The judicial branch of the United States government is very poorly equipped to conduct such relations. First, its judges have minimal if any experience with individual foreign governments or experience in conducting diplomatic exchanges. Second, by its nature, the judiciary cannot even consider issues that are of vital importance: if the U.S. has a naval base in Slobovia, for example, any action against Slobovia should take possible repercussions on United States security into account. Yet a U.S. court would only be able to engage in legalistic antitrust analysis, without any regard for this critical issue. This example not only points out the complications inherent in the export of United States antitrust law but also the wisdom of the Act of State doctrine. Courts should keep their noses out of disputes that they are ill equipped to resolve. 3. Answer: Judge Hand required that it be the specific purpose of the agreement to restrain imports into the United States. The overall restrictive purpose would not have sufficed. 4. Answer: It is very speculative to try and say what would have happened, but the central point is that there was no place whatever in Judge Hand's analysis for a distinction between America's allies and its enemies. German enemies, Swiss neutrals, and Canadian allies were all the same in the face of bloodless antitrust analysis. It is at least arguable that when a country is fighting for its life, its institutions ought to take actions that are mindful of the struggle. In the case of the judiciary, this can amount to little more than abstention. It should be noted that Judge Hand was acutely aware of the struggle -- he is the author of a famous World War II speech on the Spirit of Liberty -- and would have behaved appropriately if he thought that a decision in Alcoa would have any adverse effect. It is sometimes suggested that U.S. judges' willingness to expand their jurisdiction throughout the world is reflective of a national American attitude of self-importance. Judges are, like all human beings, largely a product of their environment. Whether that is true is a subject ripe for discussion. 5. Answer: It is usually better for a plaintiff to bring an antitrust lawsuit in the United States than a competition suit in the U.K. First, the United States has invented “notice” pleading; the plaintiff need only give the defendant general notice of the theory of the lawsuit asserting that the plaintiff is entitled to relief without giving the particulars of its lawsuit. In practice, this means that the plaintiff can conduct discovery to find out if it has a lawsuit. Human nature being what it is, plaintiffs usually “find” a right of action. Second, under the U.S. Federal Rules of Procedure, a plaintiff may seek sweeping reviews of warehouses full of defendant's documents, take depositions of countless defendant employees and third parties, and direct interrogatories at the defendants. Britain's system of discovery is not nearly so extensive and may only be used after service of a complaint with particularized allegations. Third, it is cheaper for a plaintiff to sue. In the U.K., the loser has to pay for the winner's attorney's fees, while in the U.S., the plaintiff faces no such risk. Indeed, the U.S. plaintiff does not risk even its own legal counsel's fees if it can contract with an attorney for representation on a “contingency” basis. Finally, the prize of winning is much larger in the U.S. In the U.S., a successful plaintiff is awarded three times the damages that it can prove, while the U.K. has no such principle. It should be noted that in the 1980s, the expense of conducting antitrust litigation under the wide-open U.S. discovery rules grew to tremendous proportions and the courts fashioned somewhat more restrictive interpretations of existing law. The volume of antitrust litigation in the U.S. has accordingly declined. 6. Answer: In the U.S. model, court interpretation of treaties allows case law and a presumably principled approach that is, arguably, free of changing political winds. In the English model, the treaty would be interpreted by the executive or legislative branches. 7. Answer: It is true that if two U.K. companies are ruled by American law in commerce directly affecting Great Britain, American economic policy has been extended to Britain. But it is similarly true that if British law governs, the United States is being governed by British policy. In either case, the result is a weakening of international trade and investment. The truth is that in international affairs, compromises have to be worked out as to whose policy governs when. An analogy might be made to the body of law called “conflicts of law,” under which a court might do an analysis of which of the two jurisdictions has the most contacts with the transaction. Similar analysis weighs the number of contacts that each forum has to a cause of action to determine its proper venue. Unfortunately, however, courts often employ such principles to retain jurisdiction over cases they find interesting and to rid themselves of cases that they don't. Solution Manual for International Business Law and Its Environment Richard Schaffer, Filiberto Agusti, Lucien J. Dhooge 9781285427041
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